(a) What is a contract? (b) List five elements of a contract (c) Explain six conditions that could lead to the termination of a contract.

Answer Details

(a) What is a contract?

A contract is a legally binding agreement between two or more persons which creates rights and obligations that can be enforced in a court of law. It is an agreement supported by consideration and made with the intention of creating legal relations.

(b) Five elements of a contract

1. Offer - a definite proposal made by one party.
2. Acceptance - the unqualified agreement to the terms of the offer.
3. Consideration - something of value exchanged between the parties.
4. Intention to create legal relations - both parties must intend the agreement to be legally binding.
5. Capacity to contract - the parties must be legally competent (of full age, sound mind, and not disqualified by law). (Free consent and legality of purpose are also required.)

(c) Six conditions that could lead to the termination (discharge) of a contract

1. Performance: The contract ends when both parties fully carry out their obligations.
2. Agreement: The parties may mutually agree to bring the contract to an end.
3. Breach: When one party fails to perform his part, the injured party may treat the contract as ended and sue for damages.
4. Frustration (impossibility of performance): The contract ends when an unforeseen event makes performance impossible, for example destruction of the subject matter or a change in the law.
5. Lapse of time: A contract is discharged when the time fixed for its performance expires or the period allowed by the law of limitation passes.
6. Operation of law: The contract may end through death, bankruptcy, or where the subject matter becomes illegal.